We observe that for a $20 million portfolio, setting up a formal family office isn’t the right move. Typically, the economics of setting up and running a family office is more viable if the size of the investible assets is at least $100 million, due to steep costs. At the very least, you would need to:
- hire a full-time investment expert who acts as Chief Investment Officer (CIO),
- hire one or more investment analysts (optional),
- hire at least one administrative staff,
- subscribe to a bunch of proprietary data repositories,
- cover frequent travelling for at least one investment expert to discover opportunities and to conduct due diligence,
- access legal advice on a need-basis,
- access tax advice on a need-basis, and
- pay for day-to-day services such as bill payments and managing fund office properties.
As you suspected, these costs add up to a tidy amount! There is an option to share these costs with others. If your investible assets are above $15 million, you can consider pooling your assets with those of other wealthy people to set up a multi-family office. It is very important to ensure that all members of the multi-family office agree on the investment style and the nature of expenses incurred. This is easier said than done! This approach is prone to occasional disagreements between the members of the multi-family office. A multi-family office can be a great structure, but it requires finding like-minded wealthy people whose financial philosophies and personal values align perfectly with your own.
So, because the size of your investible wealth is around $20 million, you have the following options:
- If your life situation pertaining to finances is complex, or your investment approach is unique and highly-subjective, you can opt for a high-quality traditional financial adviser or a private wealth manager to meet those needs. The rest of your wealth can be invested through a good robo-advice solution. You can follow the core-satellite approach.
- Otherwise, you can consider investing all your investible assets in a highly-diversified portfolio for the long term. You can opt for a good robo-advice service for all of your investible assets.
Related information
Read the answers to the related questions:
- Should I use a robo adviser or invest by myself?
- What does it take to make DIY (do-it-yourself) investments rather than hiring a financial adviser?
- Should I hire a financial adviser to help me invest a small amount, say $5,000, for the long term?
- How much money should I have before I need a financial adviser?
- How much should I invest through QuietGrowth?
Also refer to the related knowledge resources:
- An introduction to family office
- An introduction to discretionary investment management
- Financial advisers and discretionary investment management
- An introduction to wealth management
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